Costs and benefits of a prenuptial agreement.

Newly engaged couples have a host of decisions to make.

“What date should we set for the wedding?”

“Who should we invite?”

“Should we draw up a prenup?”

That last question might stir up a mix of surprise, concern, and confusion about your partner’s view of ‘‘till death do us part’’. But, there’s no cause for alarm. It appears that more people are considering the possibility of divorce even in the midst of wedding planning.

A recent Harris Poll survey¹  found that 50% of U.S. adults somewhat support using prenuptial agreements, aka prenups, up from 42% the prior year. While only 1 in 5 (20%) of married couples actually have a prenup in place, views about creating a legal document detailing how assets and debts will be divided during a divorce appear more pragmatic than relationship-defining.

But are the costs of a prenup worth the amount it could save if the union doesn’t last a lifetime?

What is a prenuptial agreement?

A prenuptial agreement is a legal document signed by two people prior to marriage. It typically defines how items commonly shared as a result of the nuptials will be divided in the event of a divorce. Examples include:

• Personal property
• Financial assets
• Debt obligations
• Child custody
• Pet custody

The document may also state that specific assets acquired prior to or during the marriage are excluded from ownership claims during a divorce. Agreements are enforceable as long as they are in writing, willingly signed by both parties, and meet the requirements of the state.

Prenuptial agreement costs

Before considering the costs of an enforceable prenuptial agreement, couples should know that requirements for a valid document vary by state. This, along with the complexity of each person’s assets and financial obligations, will figure into the final cost. Expect to pay an attorney anywhere from $1,000 to $10,000, with the higher end for agreements requiring more time to produce or special legal knowledge. While this might sound expensive, remember that the average U.S. uncontested divorce runs between $15,000 and $20,000.²

Benefits of a prenuptial agreement

Individuals are waiting longer to tie the knot. By the time they say, “I do,” net worth and debt totals are often greater than if they had married earlier in life. A partner might already have children from a past relationship, significant business interests, and other financial considerations they wish to protect from potentially contentious divorce proceedings. Other advantages include:

• Property protection if you live in a state with community property laws which require married couples to split assets in the event of divorce.
• Financial protection from debts your future spouse signs for during the marriage, e.g., student loans or credit cards. A prenup could remove post-divorce responsibilities.

A well-drafted prenuptial agreement gives both parties a clear path forward if one or both partners decide to end the marriage. It not only works to prevent lengthy court battles and expensive legal fees, but the document could also reduce conflict during a highly emotional time.

While the primary focus is assets and debts that existed before the nuptials, a prenup can also include clauses that reflect the couple’s values, concerns, and priorities during the marriage. Examples include:

• Infidelity penalties that a cheating partner must pay
• Child-rearing expectations related to such things as cultural practices
• Instructions for the disposition of frozen embryos if reproductive technology is used during the marriage

Since both parties must agree and sign the prenuptial agreement, they can include almost any stipulation in the legally binding document.

Other considerations

While a prenup could offer financial protection for both parties, this doesn’t mean it’s the right choice for all couples. For example, if you both agree that assets and debts should be divided fairly in the event of a divorce AND you live in a state with community property laws, a prenup might be redundant.

Prenup agreements are not foolproof. A court can deem the agreement null and void if either party signs the agreement:

• Against their will or as a result of pressure or threats
• Under false pretenses, such as misrepresentation of assets or debts
• Without understanding their obligations as defined in the document

Remember that state laws effect legal enforceability of the agreement.

While the topic can be uncomfortable, a prenuptial agreement might give engaged couples peace of mind and keep legal costs down in the event of a divorce. But there might be other options worth considering, like a trust that separates certain assets from the marital estate. Consult with a qualified attorney to discuss your situation today.